Most analysis of the crash has concluded that the single eMini futures trade performed by Waddell & Reed's Ivy Asset Strategy mutual fund is pretty much the entire story. For example the widely-published rant by the CEO of Tradebot apparently considers this to be "historic incompetence".

However, the guys over at Nanex are trying to understand why so many people still think that the Waddell & Reed trade is the be-all and end-all of the analysis. As they say,

The bulk of the W&R trades occurred after the market bottomed and was rocketing higher -- a point in time that the SEC report tells us the market was out of liquidity.

I'm not sure if this is exactly what the Nanex team is referring to, but here's part of the SEC report regarding liquidity:

If this example is typical of the price patterns at that time, and given that the internalizer would have routed to the exchange with the best available price, it seems that the general withdrawal of liquidity that led to broken trades was at least as prevalent on NYSE Arca as it was on Nasdaq and BATS. This suggests that if Nasdaq or BATS had re-routed orders to NYSE Arca, then these orders would have also been executed at unrealistically-low prices on NYSE Arca and subsequently broken. From this example it does not seem that self-help led to orders “routing around” liquidity at NYSE Arca, but rather that liquidity had been withdrawn across all exchanges, including NYSE Arca.

The Themis Trading team have some strong words regarding HFT and whether or not volume is the same thing as liquidity:

Yet we have recently heard the head of electronic trading at a major bulge bracket firm claim that the culprit in the flash crash was the market order. I’m not kidding. He said it in an editorial in Traders Magazine.If you can’t handle market orders in what’s sup- posedly a very liquid market, it goes to show you that volume is not the same thing as liquidi- ty. If the HFT crowd is providing liquidity for investors and lowering costs, then why can’t we handle a simple 100-year-old order type in a market whose volume has increased 300%? What does it say when one of the guys who is playing the game is telling the world: “Do not trust our market because we can’t handle a market order”?

...

Our view is that HFTs provide only low-quality liquidity. In the old days, when NYSE specialists or Nasdaq market makers added liquidity, they were required to maintain a fair and orderly market, and to post a quote that was part of the National Best Bid and Offer a minimum percent- age of time. HFTs have no such requirements. They have no minimum shares to provide nor do they have a minimum quote time. They can turn off their liquidity at any time — as we saw quite clearly on May 6. What’s more, HFT volume can generate false trading signals, causing other investors to buy at higher prices, or sell at lower ones, than they otherwise would.

Now, over at the St Petersburg Times, Robert Trigaux is wondering why people aren't studying the "mini-flash-crash" that occurred in Progress Energy stock on Sep 27th:

In minutes, shares dropped from $44.60 to $4.57 — an 88 percent decline — only to bounce back within seconds to just under $44.

I liked this computer-science-perspective over at Ars Technica, which, with a rather strained argument, proposes that the stock market can be viewed using systems analysis as a complex system: The stock market as a single, very big piece of multithreaded software. It makes the same point that many are making: volume is not the same thing as liquidity. And it proposes a view-point of the stock-market as distributed message-passing system:

The price of, say, AAPL at any given moment is a numerical value that represents the output of one set of concurrently running processes, and it also acts as the input for another set of processes. AAPL, then, is one of many hundreds of thousands of global variables that the market-as-software uses for message-passing among its billions of simultaneously running threads.

It's a pretty interesting idea, I think.

I also found this interesting work at Grant Thornton, who claim that Regulation NMS and the HFT trading industry, together with the switch to for-profit stock exchanges, is largely to blame for the collapse in the IPO market as a tool for capital creation in our economy:

The IPO Crisis is primarily a market-structure-caused crisis, the roots of which date back at least to 1997. The erosion in the U.S. IPO market can be seen as the perfect storm of unintended consequences from the cumulative effects of uncoordinated regulatory changes and inevitable technology advances — all of which stripped away the economic model that once supported investors and small cap companies with capital commitment, sales support and high- quality research.

Grant Thornton say that the liquidity loss is particularly steep for small cap stocks, and that this is one of the big reasons why no new small-cap stocks are appearing in the market (i.e., why there aren't any IPOs anymore).

“Make or take” pricing, the charging of access fees to market orders that “take” liquidity and paying rebates to limit orders that “make” liquidity, causes distortions that should be corrected. Such charges are not reflected in the quotations used for the measurement of best execution. Direct access by non-brokers to trading platforms requires appropriate risk management. Front running orders in correlated securities should be banned.

I'll try to dig into the paper as I find time, and I'll continue trying to plow through the massive SEC report. If you see any good resources in this area, please let me know.